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This stock market investing cheat sheet is for education and information purposes only. THIS IS…
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The information contained in this document is not intended as, and shall not be understood or
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information contained in this document is not a substitute for financial advice from a professional
who is aware of the facts and circumstances of your individual situation.
I have done my best to ensure that the information provided in this document is accurate and
provides valuable information. Regardless of anything to the contrary, nothing available in this
document should be understood as a recommendation that you should not consult with a financial
professional to address your particular information. I expressly recommend that you seek advice
from a professional.
The creator of this document shall not be held liable or responsible for any errors or omissions in this
document or for any damage you may suffer as a result of failing to seek competent financial advice
from a professional who is familiar with your situation.
 DISCLAIMER
NOT TAX ADVICE
The information contained in this document is not intended as, and shall not be understood or
construed as, tax advice. The information contained in this document is not a substitute for tax advice
from a professional who is aware of the facts and circumstances of your individual situation.
I have done my best to ensure that the information provided in this document is accurate and provides
valuable information. Regardless of anything to the contrary, nothing available on or through this
document should be understood as a recommendation that you should not consult with a tax
professional to address your particular information. I expressly recommend that you seek advice from a
professional.
The creator of this document shall not be held liable or responsible for any errors or omissions in this
document for any damage you may suffer as a result of failing to seek competent tax advice from a
professional who is familiar with your situation.
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The information contained in this document is not intended as, and shall not be understood or
construed as, professional advice. Information contained in this document is not a substitute for advice
from a professional who is aware of the facts and circumstances of your individual situation.
I have done my best to ensure that the information provided in this documentation is accurate and
provides valuable information. Regardless of anything to the contrary, nothing available in this
document should be understood as a recommendation that you should not consult with a professional
to address your particular information. I expressly recommend that you seek advice from a professional.
The creator of this document shall not be held liable or responsible for any errors or omissions in this
document or for any damage you may suffer as a result of failing to seek competent advice from a
professional who is familiar with your situation.
 DISCLAIMER
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 BRAINSTORMING
Before you spend a dime in the stock market, you need to decide which
stocks to buy. It’s time to fire up that mental machine between your
ears and get brainstorming. However, unlike uneducated investors, you
are going to want to brainstorm while keeping certain considerations in
mind.

Your brainstorming session should revolve around three primary

considerations which are outlined in the Venn Diagram below. On the
next page I will describe each in more detail so that you can maximize
the output of your brainstorming efforts!

Field of Expertise

High-Demand Hobbies &

Industries Passions
 BRAINSTORMING

As Warren Buffett says, “Never invest in a

business which you cannot understand” and
Field of
by leveraging your existing expertise, you can
Expertise
have a better chance at identifying companies
that will yield you investment returns.

Business success or failure is dependent on

the demand of customers for their respective
High-Demand products and services. Focus your analysis on
Industries businesses that offer something that its
customers cannot go without (i.e. utilities,
smartphones)

Stock investing is meant to make you money,

but it should be fun at the same time.
Hobbies & Consider where your current passions lie and
Passions see if your interests can be incorporated into
the stocks you will buy into. This makes the
research phase that much more enjoyable!
 BRAINSTORMING
Now that you are familiar with the three primary considerations, let’s
use an example to illustrate what stocks someone might invest in based
on these factors:

Hardware Engineering

Smartphone App Development

 HIGH-LEVEL SCANNING
With the high-demand industry identified, it’s now time to scan
companies in this industry that you may consider investing in.

To do this, we will use the Trading View US Stock Market Industry List.

Scroll through the list of industries until you identify the one that best
matches the industry you wrote down in the brainstorming exercise.
In our example, the industry of choice related to smartphones
therefore we would select “Electronic Technology” from the list of
industries to see potential companies to invest in.
 SHORT-LISTING STOCKS
At this point, you’ve identified your field of expertise, passion and
lucrative industries and have reviewed companies that could make
worthwhile investments. The question now is, amidst all of the
potential companies to select, which gives you the best chance to
realize appreciable returns?
Again, we defer to The Oracle of Omaha’s investing advice which
revolves around a company’s moat. A moat, is a company’s competitive
advantage – or how well a company can fight off its competition and
maintain its profits. Unsurprisingly, the stronger the moat, the higher
chances the company will have of achieving long-term profitability
(meaning more returns for you the investor).
 SHORT-LISTING STOCKS
Here are some of the leading factors that companies can use to
separate themselves from the competition:
• Cost advantage: Involves operating at the lowest cost possible in
order to maximize profits (Think Walmart’s low-cost system derived
from their high-volume buying discounts and negotiating power
over its suppliers)
• Size advantage: When companies use their size to gain economic
advantages (Think Amazon’s ability to offer one-day shipping due to
their extensive warehousing and delivery infrastructure)
• High switching costs: Those doing business with a strong moat
company may have to incur significant costs if they were to move to
a competitor (Think of the cost of switching from using a Mac to a
Windows computer and the time and energy cost of learning how to
use a new operating system and the cost of buying new accessories)
• Intangibles: A company’s inherent qualities that provide value to its
users such as brand recognition (Think Lexus and its reputation for
luxury and quality or the social value of being an Apple or Android
user)
You may be thinking to yourself, “how impactful are moats on my
investing success?”. The answer is very impactful. Investing in
companies with strong moats will ease your investing stress because
there is a very minute chance of the company tanking. Not to mention,
they will be your best bet when it comes to reaping profits for years to
come. Therefore, never underestimate the power of a strong moat!
 SHORT-LISTING STOCKS
Moat analysis example (Apple Inc.)
• Size advantage: Due to Apple’s massive success and strong financial
position, the company can afford to spend significantly more on
research and development for new products or services than its
competitors which allows it to maintain its status as an innovation
leader. Moreover, having a global presence with stores all over the
world, this allows the company to reach more customers and
ultimately maximize their opportunities to earn revenue.
• High switching costs: Having strong product and service integration
(syncing IPhone to Macbook and Apple Watch) allows its customers
to become immersed in the Apple world and the adoption of a new
technology set up comes at a high switching cost for its customers.
• Intangibles: Apple has built a strong culture and following through
its commitment to innovation. Moreover, Apple products or being
an “Apple user”, in many circles, demonstrates more social value
than that of its competitors. Finally, the brand is known for its
premium quality as their products have proven to possess better
longevity than those of their competitors.
As you can see, a company like Apple has many moats that it relies
upon to separate itself from the competition. This type of analysis
should be done for all companies you are considering investing into in
order to ensure that your hard-earned money isn’t wasted on
companies that aren’t strongly positioned in their respective industries.
 PERFORMANCE ANALYSIS
Now that we’ve identified companies with strong competitive
advantages, it’s time to dive into the numbers! Here are the five
financial ratios that will help you weed through the winners and losers:

1. Earnings Per Share (EPS): Amount of profit the company yields per
share outstanding.
2. Return on Invested Capital (ROIC): Amount of capital invested in
relation to the returns said capital is yielding. This is often seen as
the most important profitability measure as it identifies how well
the company manages its resources.
3. Quick Ratio: Measure of a company’s ability to meet its short-term
liabilities with the liquid assets it has available. A Quick Ratio of 1 or
greater is recommended as the company can immediately meet its
short-term obligations.
4. Debt-To-Equity Ratio (D/E): Measure of the degree to which a
company is financing its operations through debt versus funds the
company possesses as a result of their own business dealings.
Higher D/E ratio is not an inherent issue, but it does indicate that
the company relies on external funding to maintain its operations.
5. Price-To-Earnings Ratio (P/E): Ratio to determine how cheap or
expensive the stock is compared with its peers by assessing how
appropriately priced the share is compared to its earnings. Stocks
with higher P/E ratios compared to its competitors may be
overvalued as there is a greater disparity between their stock price
and earnings.
PERFORMANCE ANALYSIS
Earnings Per Share (EPS)
Share Price
Total Outstanding Shares

Return on Invested Capital (ROIC)

Net Operating Profit (After-tax)
Invested Capital

Quick Ratio
Current Assets - Inventory
Current Liabilities

Debt-To-Equity Ratio (D/E)

Total Debt
Total Equity

Price-To-Earnings Ratio (P/E)

Share Price
Earnings Per Share
 PERFORMANCE ANALYSIS
While it is beneficial to understand how to read and manipulate the
financial statements of any company you may invest in, most financial
information platforms like Trade View have pre-calculated these ratios
for you. For instance, if you were considering investing in NVIDIA
(ticker: NVDA), another company in the industry we have identified in
Step 1, you can see all of these ratios simply by searching the company
in the website’s search function. Here is how this information is
displayed (key ratios highlighted):
PERFORMANCE ANALYSIS
 PRICE ANALYSIS
At this point, you should know which shares you want to acquire, but at
what price point? Here are two primary methods you can use to
determine if now is a good time to buy the shares you’re interested in:

Method #1: Price Targeting

A price target is an analyst’s projection of a share’s future value
(typically the expected value within a 12-18-month timeframe). If the
price target is anticipated to be greater than the current share price,
then this may indicate that this share can make a profitable investment.
If the price target is anticipated to be less than the current share price,
then investors are generally dissuaded from buying this share. Many
financial platforms offer these insights which can be incorporated in
your buying decision.

Method #2: Value Analysis

Another method of assessing whether you should get into a particular
share is by assessing its share value compared to its current market
price. This is where we rely upon the Price-To-Earnings ratio (which you
are now familiar with) to determine the intrinsic value of the share
being reviewed.

Examples of both methods follow on the subsequent pages…

 PRICE ANALYSIS
Price Targeting Example
Here is a projection of NVIDIA (ticket: NVDA) from November 27, 2020:

When using the Price Target method, you will be deferring to the
knowledge and expertise of financial analysts who publicly share their
anticipated performance reports like the one you see above. As shown,
the price target range for NVDA is between $370-$700 for the next 12
months.

Assuming you take the median price as being the most reasonable for
analysis purposes, we can see that the current price ($532.20) is less
than what it is expected to be priced at within the next year ($600)
meaning that if the share reaches the median price target or higher
then you will be in a profit position.

Caution: There is no guarantee that these projections will be accurate

and you must invest at your own risk.
 PRICE ANALYSIS
Value Analysis Example
Here is a value analysis of fictional company ABC Corp.

Intrinsic Value = Earnings per share X P/E Ratio

Financial Information for ABC Corp.:

• Current Price: $85
• Current Price-To-Earnings Ratio (P/E)1: 26.90
• Historical Price-To-Earnings Ratio: 22
• Earnings Per Share (EPS) TTM2: 3.16

Intrinsic Value3 = $3.16 X 22

Intrinsic Value = $69.52

Price-Value Disparity = Intrinsic Value – Current Price

= $69.52-85
= -$15.48

As shown by the Price-Value Disparity, the current share price of ABC

Corp. is overvalued by $15.48. If the intrinsic value of the share were to
have been higher than the current price, then this would be a scenario
where you may consider buying the stock.
1 Calculation is the current price divided by the EPS TTM
2TTM is shorthand for Trailing 12 Months
3Calculation assumes ABC Corp. will have the same EPS TTM in the upcoming fiscal year
 PRICE ANALYSIS
While I have just walked you through two methods of determining an
appropriate buy-in price for the companies you have reviewed, here are
some other methods to consider:

Method #1: Gordon Growth Model

Uses the company’s dividends and dividend growth potential to
determine the current stocks price.
Dividend Per Share
Share Value =
(Shareholder Return % - Dividend Growth %)
Note: This model is only applicable to companies which distribute
dividends regularly and consistently in terms of dividend value.

Method #2: Benjamin Graham Value Formula

Used to calculate the intrinsic value of a stock and assumes both a P/E
ratio of 15 and a 1.5 multiplier (his belief that no company should sell
for more than 1.5x its book value).

Intrinsic Value = SQRT[1.5x1.5x(EPS)x(Book Value Per Share)]

On top of these methods, there are many others but keep in mind that
no stock valuation method will guarantee that you will buy a winning
stock therefore always live by this investing tenet: Only invest money
you can afford to lose!
 NEXT STEPS
You did it! You made it through the stock market cheat sheet!

I hope you now have a better understanding of the process required to

pick winning stocks and that you can use this newfound knowledge to
build the wealth you deserve.

If you want to learn more about investing, feel free to check out my 7-
module video course called Stock Investor Academy: A Beginner's
Guide To Successful Investing.

And, because we’re family now, if you follow this link I will hook you up
with a nice discount so you can really take your investing game to the
next level: Stock Investor Academy

If you want to connect further, you can message me here:

@ADAM_DELDUCA

@ADAMDELDUCA